Estate planning involves much more than just creating a will.
Estate planning is planning for what you want to happen to you and your assets at the end of your life. Many people think that estate planning just means preparing a will, but this type of planning actually covers much more.
You need to decide who will manage your assets and medical care if you lose the capacity to make these decisions, plus what type of medical care you will consent to. Deciding what kind of life insurance you need is also essential. You need to consider whether to build a trust, which is a legal agreement specifying how the assets in the trust will be distributed. A trust also designates a person, called the trustee, who will manage the distribution.
The easy answer is everyone. Of course, hiring an attorney and creating an estate plan may not be an option for everyone. There are online basic estate plans if you need a more affordable option than an attorney. But if you have children or other dependents, or you have substantial assets, stick with an attorney.
Even if you don’t fall into any of those categories, you should still consider working on an estate plan. It’s impossible to know when you may become incapacitated, and some pieces of the plan can take a long time to come together.
Here are a few key benefits of creating an estate plan now:
Here are the steps to creating and maintaining an estate plan:
1. Make your medical decisions
This includes deciding when and if you will move into a nursing home, how much and what kind of care you wish to receive, and who can make medical decisions for you if you are incapacitated.
2. Choose a trusted person
You’ll need to choose the person, known as a healthcare proxy, who will make medical decisions if you’re unable to do so. You’ll also want to designate someone as power of attorney to manage your financial affairs and property if you can no longer do so. This person is often a child or spouse, but it can be anyone you choose.
3. Update your paperwork
Make sure the beneficiaries on any life insurance policies and retirement accounts are updated. Beneficiary designations supersede your will instructions. That means that even if you leave all your assets to someone in your will, the person listed as the beneficiary will receive the policy or retirement account. You don’t want a death benefit to go to an ex-spouse because the forms were never updated.
4. Value your assets
Put together a personal balance sheet that includes real estate, stock, bank balances, vehicles, collectibles, and all liabilities. Keep these values updated. If you set up a trust and then accumulate new assets, you could add years to the process.
5. Decide how the assets will be divided
Unless you set up an irrevocable trust, these decisions can be changed. After you do this, make your bank account payable on death. This will make it so the money avoids probate and goes directly to the beneficiary.
6. Make a succession plan for your business
If you own and run a business, you probably have an idea how difficult it would be to adjust operations if you weren’t there. Put a plan together for future ownership and who will manage the company.
7. Engage an attorney
No matter what size your estate is, you’ll benefit from working with a professional. You can also disregard the order of this list if you’re having problems and engage an attorney for help at any time.
8. Decide what type of life insurance and long-term care insurance you need
Life insurance will support your dependents, and long-term care insurance can save your assets from being used to reimburse Medicaid.
The following tools can help you in estate planning:
You should be armed now with enough information to begin your estate planning. Even if you’re young and your assets are limited, it’s essential to start making a plan.